Tag Archives: investing

Do men and women have different Savings Habits?

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By Danielle Kubes

Special to the Financial Independence Hub

In an online survey about savings habits, financial comparison site Ratehub.ca reports that although Canadian men and women save almost the same amount of money, men have a greater level of confidence in their financial planning.

Inspired by 2014 Statistics Canada data that says Canadian women have lower financial literacy scores than men and were less likely to consider themselves “financially knowledgeable” (31% of women versus 43% of men), Ratehub.ca set out to discover if there truly is a gender divide. 

The company digitally surveyed a random sample of 1,087 Canadians in November, with respondents self-identifying their gender.

“Our survey revealed that while men and women differ in aspects of their financial planning, at the core, their personal finance goals and concerns are nearly identical,” the report says.

Both genders have similar financial goals

Indeed, both genders report almost the exact same financial goals. At the top of list of priorities is retirement, followed by travel and then having an emergency fund.

Both men and women prefer to save and invest in registered accounts, especially the registered retirement savings plan (RRSP) and tax-free savings account (TFSA). What they choose to invest in within these accounts — guaranteed income certificates (GICs), exchange traded funds (ETFs), stocks, or other products — is unknown.

Yet men and women diverge most in how confident they are that they’ll have enough money to retire: less than half of women, 41%, say they’re confident compared to over half of men surveyed, at 56%.

Odd, because both genders save almost the same amount of their salaries, with women saving 26% and men 29%.

The gap could potentially be explained in how able they are to grow those savings through investing. Eighty-five per cent of men invest their money, while only 76% of women do.

Of those that do invest, less women than men self-manage their investments, potentially indicating another worrisome lack of confidence in their financial knowledge.

This is supported by the original Statistics Canada data, which found women were less likely to state they “know enough about investments to choose the right ones that are suitable for their circumstances.”

Confidence doesn’t mean financial knowledge

But does confidence translate to actual financial knowledge? Apparently not. When Statistics Canada quizzed Canadians who rated themselves financially literate, one in every three women failed, while one in every four men failed. Continue Reading…

Large taxable foreign portfolio? Watch $100K and $250K thresholds for CRA’s T1135 form

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If you’re a Canadian investor with a large taxable foreign portfolio, you need to be aware of your cost base, since exceeding $100,000 of so-called Specified Foreign Property (SFP) has to be reported to the Canada Revenue Agency.

This is examined in my (monthly) High-Net Worth column for the Globe & Mail Report on Business which was published online on Friday and was in the physical paper Wednesday, Nov. 15. You may be able to retrieve it by clicking on the highlighted headline: Pay Close Attention to Your Foreign Assets to Avoid Tax Troubles. (Depending on how often you access the site, access may be restricted to subscribers. I’ve summarized the main points below.)

If you file your own taxes, you may have noticed an innocuous looking “box” you may or may not tick each year that ask whether you own “Specified Foreign Property.” If you have a cost base of more than $100,000 of SPF you have to tick that box and fill out a CRA form called the T1135. For most Canadian investors the relevant investments will probably consist primarily of individual US stocks, ADRs and/or foreign equity ETFs trading on US and other foreign stock exchanges.

There is also a higher threshold of $250,000 you also should be aware of because this entails even more detailed reporting and paperwork, and the article suggests you may wish to avoid reaching that higher threshold. The $100,000 and $200,000 thresholds are per individual, not household, and again, it’s based on cost base not current market value.

Failure to comply can entail serious penalties.

How to stay below the threshold and still have foreign content

If you would rather not deal with more CRA paperwork and capital gains hassles, I’d argue you should try to stay below the $100,000 threshold, in which case you don’t have to tick the box on your tax return. Continue Reading…

Paycheque to paycheque: the fate of half of Canada’s employees

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Living paycheque to paycheque? You’re hardly alone. As my latest Financial Post blog reprises today, almost half of Canadian workers (47%) told the Canadian Payroll Association’s 2017 survey that they’d find it hard to meet their financial obligations if their pay cheque were delayed by even a single week.

You can find the full blog by clicking on the highlighted headline here: Nearly half of Canadians would face a financial crunch if paycheque delayed by even a week, survey shows. The  article also appears in the Thursday print edition, page FP5, under the headline Nearly half of Canadians walk financial tightrope.

As I point out at the end of the FP piece, there’s some irony in that the way out of this savings conundrum is to make an effort to save paycheque by paycheque: a strategy the CPA and other financial experts generally term “Pay Yourself First.”

That means using your financial institution’s pre-authorized chequing arrangements (PACs) to automatically divert 10% of net pay into savings the moment a paycheque hits your bank account. Just like income taxes taken off “at source,” the idea is that you won’t miss what you don’t actually receive.

Pay Yourself First

Continue Reading…

Mid-year review of Aman Raina’s Robo Advisor portfolio

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By Aman Raina, SageInvestors

Special to the Financial Independence Hub

Aman Raina

As we cross the mid-pole mark in 2017, it seems like a good time to check in on my Robo Portfolio that I created two and half years ago.  For those jumping on for the first time, I wanted to try to find out if this new type of investment service which was taking the industry by storm a few years ago does any better job of creating wealth for investors compared to the traditional methods of investing (i.e. Do-It-Yourself or having a professional manage your money on your behalf).

I chose one Robo Advisor company here in Canada and invested $5,000 of my own money. When I set up the account I answered a series of questions about my financial literacy and risk tolerance. ROBO took my responses and crafted a portfolio that it felt reflected my profile.

As I am pretty experienced with investing and have a long-term investment horizon, ROBO determined that a portfolio mix of 85 per cent stocks and 15 per cent bonds would work for me. From there ROBO carved out allocations to a variety of equity and bond assets using ETFs to provide the appropriate exposure.

The objective of this exercise is to observe and blog about the whole experience and share with you any unique insights about the service. Most importantly I wanted to see what kind of returns this type of portfolio can generate. My experiment is by no means scientific but I think there is a lot that we can learn about this service if we go beyond the slick websites and marketing to truly look underneath the hood to see how these portfolios are managed.

Performance still reasonable

When we last checked in with my ROBO portfolio in late January, it was chugging along rather nicely, generating somewhat decent returns. It appears to be continuing the trend. Since the start of the year, the ROBO portfolio is up 5.5 per cent. Since I set up the account, the portfolio is up 14.2 per cent. The portfolio is up $298.71 this year, of which $53.59 was in dividend payments. Again, pretty reasonable for me. When you look at portfolio breakdown most of the returns have come from US stocks, Foreign stocks, and Emerging Market stocks.

ROBO Portfolio - 6 month performance chart

ROBO Portfolio – 6 month performance chart

ROBO portfolio - Asset Allocation breakdown - July 3, 2017

ROBO portfolio – Asset Allocation breakdown – July 3, 2017

Asset Allocation: Breaking News! 

It all seems decent enough; however, shortly after I posted my report in February, the portfolio has gone through some changes. Continue Reading…

How to make realistic retirement calculations for your future

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When you’re investing and planning for retirement, make realistic calculations rather than indulging in wishful thinking.

If you plan to retire at 65, and you’re 50, you won’t be dipping into your investments for 15 years. If you are in reasonably good health, you could live well into your 80s: possibly longer.

Let’s say you have $200,000 in your RRSP, and expect to add $15,000 in each of the next 15 years.

To determine if this is enough, you need to make some realistic retirement calculations about investment returns and income needs.

What you can expect

Long-term studies show that the stock market as a whole generally produces total pre-tax annual returns of 8% to 10%, or around 6% after inflation. For the purposes of retirement planning, we’ll assume a 6% yearly return, and disregard inflation. Your $200,000 grows to $479,312*, and your yearly $15,000 RRSP contributions add up to $370,088, for total retirement savings of $849,400.

*Be sure to check your math. There are many compound-return calculators available online. For example, you can find a comprehensive compound-return calculator at the Bank of Canada’s web site.

Income and outgo

If you continue to earn 6% a year, and you withdraw $50,964 a year (6% of the $849,400 in your RRSP), you can avoid dipping into capital until your mid-70s, when RRIF rules require a larger withdrawal.

However, if you start taking money out faster, or earn lower returns, you’ll run out of money.
If you withdraw $90,000 a year while earning 6%, the money you’ve accumulated will last just over 13 years. If you earn 5% but withdraw $90,000 a year, your money will be gone in just over 12 years.

Beware of getting caught in a vicious circle

Continue Reading…